United (UAL) Up 6.4% Since Last Earnings Report: Can It Continue?

Earnings Beat in Q2

United Airlines reported second-quarter 2026 adjusted earnings of $1.99 per share, down 48.6% year over year but above the Zacks Consensus Estimate of $1.92 by 3.7%.

Operating revenues rose 16% to $17.67 billion and were essentially in line with the $17.68-billion consensus mark. A 12.1% increase in total revenue per available seat mile, or TRASM, and broad-based gains across premium, loyalty and cargo revenues supported the top line despite sharply higher fuel costs.

UAL Benefits From Strong Passenger Revenue Trends

Passenger revenues increased 16.4% year over year to $16.10 billion. Domestic passenger revenues advanced 20.3%, while international passenger revenues rose 11.2%. Pacific revenues increased 18.7%, Europe gained 10.2% and Latin America improved 10.5%, partly offset by a 16.4% decline in the Middle East, India and Africa region.

Consolidated passenger revenue per available seat mile increased 12.5%, while yield rose 12.1%. Premium revenues grew 16%, Basic Economy revenues advanced 11% and loyalty revenues increased 11%. Contracted business revenues jumped 27%, reflecting robust close-in demand.

United Airlines Posts Better Traffic and Load Factor

Traffic, measured in revenue passenger miles, increased 3.8%, while capacity rose 3.5%. With traffic growth slightly outpacing capacity expansion, the consolidated load factor improved 0.3 percentage points to 83.4%.

United transported 48.7 million passengers, up 5.4% from the prior-year period. Domestic load factor declined 0.6 points to 83.5%, but the international load factor climbed 1.2 points to 83.2%. The airline also operated the 10 highest-volume passenger days in its history during June.

UAL Faces a Sharp Increase in Fuel Expense

Operating expenses rose 19.2% to $16.58 billion, outpacing revenue growth. Aircraft fuel expense surged 84.1% to $5.11 billion as the average fuel price increased 79.4% to $4.19 per gallon. Fuel consumption rose 2.7%.

Cost per available seat mile increased 15.2% to 18.99 cents. CASM-ex, which excludes fuel, profit sharing, special items and third-party business expenses, rose 6.1% to 13.12 cents. Salaries and related costs increased 6.2%, while distribution expenses climbed 32.3%.

United Airlines Sees Profitability Contract

Adjusted operating income fell 46.3% to $951 million, while the adjusted operating margin narrowed 6.2 percentage points to 5.4%. Adjusted pre-tax income declined 49.5% to $843 million, and the adjusted pre-tax margin contracted to 4.8% from 11%.

Adjusted net income decreased 48.7% to $649 million. On a reported basis, net income fell 17.3% to $805 million, while diluted earnings declined to $2.46 per share from $2.97. The difference reflected special credits, including gains from aircraft sale-leaseback transactions.

UAL Generates Cash and Builds Liquidity

Operating cash flow totaled $1.61 billion during the quarter, while free cash flow came in at $322 million. Adjusted capital expenditures were $1.45 billion, reflecting continued spending on fleet and customer-facing investments.

Available liquidity ended the quarter at $19.6 billion. Cash and cash equivalents totaled $10.17 billion, while short-term investments were $6.47 billion. Debt, finance lease obligations and other financial liabilities stood at $26.46 billion, and trailing-12-month net leverage was 2.2 times.

United Airlines Raises Its Full-Year Outlook

United now expects adjusted earnings of $9-$11 per share for 2026. For the third quarter, adjusted earnings are projected between $2.50 and $3.50 per share, based on an assumed all-in fuel price of approximately $3.69 per gallon. 

Management expects third- and fourth-quarter TRASM growth to exceed the second quarter’s 12.1% increase. The airline anticipates recovering 80%-90% of the fuel-price increase in the third quarter and all of it by the fourth quarter. Adjusted capital expenditures are forecast at approximately $7.5 billion for 2026.

UAL Expands Its Fleet and Customer Investments

United expects its mainline fleet to reach 1,173 aircraft by year-end, up from 1,122 at the end of the second quarter. The plan includes 323 Boeing 737 MAX aircraft, 100 Boeing 787s and 88 Airbus A321neo or XLR aircraft. Regional aircraft are expected to total 442.

The airline had installed Starlink on more than 450 aircraft and expects nearly 1,000 installations by year-end. It also plans to introduce its first Airbus A321XLR into domestic service in the fall, followed by international deployment early next year.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed a downward trend in estimates revision.

The consensus estimate has shifted -9.74% due to these changes.

VGM Scores

Currently, United has a average Growth Score of C, though it is lagging a bit on the Momentum Score front with a D. However, the stock was allocated a score of A on the value side, putting it in the top 20% for value investors.

Overall, the stock has an aggregate VGM Score of B. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Interestingly, United has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.

Performance of an Industry Player

United is part of the Zacks Transportation - Airline industry. Over the past month, Delta Air Lines (DAL), a stock from the same industry, has gained 5.3%. The company reported its results for the quarter ended June 2026 more than a month ago.

Delta reported revenues of $17.67 billion in the last reported quarter, representing a year-over-year change of +6.1%. EPS of $1.56 for the same period compares with $2.10 a year ago.

Delta is expected to post earnings of $2.19 per share for the current quarter, representing a year-over-year change of +28.1%. Over the last 30 days, the Zacks Consensus Estimate has changed -3.3%.

The overall direction and magnitude of estimate revisions translate into a Zacks Rank #3 (Hold) for Delta. Also, the stock has a VGM Score of B.

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This article originally published on Zacks Investment Research (zacks.com).

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